GST Registration Cancelled Retrospectively without stating any reason in SCN: Delhi HC sets aside Retrospective Effect of Cancellation [Read Order]

The Delhi High Court set aside the retrospective effect of cancellation as it was without any reason mentioned in the Show Cause Notice ( SCN ). It was observed that a taxpayer's registration can be cancelled with retrospective effect only where such consequences are intended and are warranted.  

S.S. Enterprises, the petitioner challenged the order whereby the appeal of the Petitioner has been dismissed solely on the ground that the same is barred by limitation. Petitioner also impugned an order whereby the GST registration of the Petitioner was cancelled retrospectively with effect from 01.07.2017 and also impugned Show Cause Notice dated 02.03.2019.

Subject petition has been filed by Zahira Begum, proprietor of M/s S.S Enterprises. Petitioner was engaged in the business of trading of table, kitchen or other household articles and was registered under the Goods and Service Act, 2017 (‘the Act’). 

Counsel for Petitioner submitted that the said proprietorship firm was formerly a partnership firm of the husband of the Petitioner and was subsequently converted into a proprietorship firm in 2012 in the name of the Petitioner. 

SCN was issued to the Petitioner seeking to cancel its registration. Though the notice does not specify any cogent reason, it merely states “As per VATI Report the dealer is not found functioning”.

Further, the said SCN also does not put the Petitioner to notice that the registration is liable to be cancelled retrospectively. Thus, the Petitioner had no opportunity to even object to the retrospective cancellation of the registration.

Thereafter, the impugned order dated 27.06.2019 passed on the Show Cause Notice dated 02.03.2019 does not give any reasons for cancellation. The order further states that effective date of cancellation of registration is 01.07.2017 i.e., a retrospective date. There is no material on record to show as to why the registration is sought to be cancelled retrospectively. 

As per the Petitioner, she was conducting business and has filed GSTR-1 returns with output Tax liability up to March 2019. However, the Petitioner's business has closed down due to non-availability of funds, ailing ill health of the Petitioner’s father-in-law and consequently his demise on 05.07.2022. 

In terms of Section 29(2) of the Act, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically.

It was observed that a taxpayer's registration can be cancelled with retrospective effect only where such consequences are intended and are warranted. The court noted that both the Petitioner and the respondent want cancellation of the GST registration of the Petitioner, though for different reasons.   

A division bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja that the Petitioner does not wish to carry on business or continue with the registration, impugned order dated 27.06.2019 is modified to the limited extent that registration shall now be treated as cancelled with effect from 27.06.2019 i.e., the date when the order cancelling the GST registration of the Petitioner was issued. Petitioner shall make the necessary compliances as required by Section 29 of the Central Goods and Services Tax Act, 2017.

Mr M A Ansari, Mr Khursheed Ahmad, Mr Sameed Salim, Mohd Kamil & Mr Ahmad Ansari appeared for the petitioner. Mr Rajeev Aggarwal, Mr Prateek Badhwar, Ms Shaguftha H Badhwar & Ms Samridhi Vats appeared for the respondent.

To Read the full text of the Order CLICK HERE

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